Reliance Industries seeks sops to sell fuel in India

New Delhi, Oct 3 (IANS) Reliance Industries Ltd (RIL) is ready to sell diesel again if the government extends subsidies to private players as it does for state-run oil retailers, a top company official said here Friday.The company, India’s largest in the private sector, has also sought the removal of extra taxes on transporting fuels to be able to remain competitive vis-a-vis prices of imported fuel.

In an address at an industry conference, RIL president (refineries business) P. Raghavendran said the company was forced to be get out of the domestic market after it was denied a level-playing field with public sector oil marketing companies.

Asked if getting subsidies would be enough incentive for RIL to enter the domestic market as the state firms were facing huge losses, Raghavendran said, “The short answer is ‘yes’.”

He said RIL was currently supporting its dealers, “mothballing” its 1,400 fuel stations. “We are paying them 12 percent return on their capital,” he told reporters on the sidelines of the two-day India Energy Conference that began here Friday.

To a question whether RIL could convert the fuel stations into retail outlets, he said most of them were on the highways, which were not ideal locations for retail ventures.

Besides subsidies, diesel from the Jamnagar refinery, which was given export-oriented status in 2007, also faces double taxation on its products, if it tries to sell fuel in domestic market.

It will not only pay customs and excise duty, but also an additional excise tax, increasing the price of Reliance diesel. “It will be cheaper for them (PSUs) to import (diesel),” said Raghavendran.

But, with the sharp rise in diesel demand for electricity generation, the petroleum ministry and state oil firms have been grappling with increased diesel bills. Demand has been rising at 18 percent, much more than the government’s prediction of 14 percent.

Buying diesel from the 33 million tonnes capacity Reliance refinery has become an attractive solution - but only if there were no additional taxes.

“We have asked the ministry to speak to the finance ministry to remove the double taxation on products bought from Reliance’s Jamnagar refinery,” said Indian Oil Corp chairman Sarthak Behuria.

Earlier this week, RIL chairman Mukesh Ambani met top officials in the finance and petroleum ministry, where he reportedly offered to sell diesel to state firms if double taxation was removed.

RIL is ready to commission its 29 million tonne second refinery in Jamnagar, to be run by Reliance Petroleum Ltd, before the year-end - with trial runs expected to start within a few days.

With the two refineries, Reliance will have a total capacity of 10 million tonnes of gasoline and 24 million tonnes of diesel.

Raghavendran said that with the new refinery, global refining margins will fall further. “If you believe in economics, yes it will, with so much products coming into the market,” he told reporters.

With the US being its biggest market, the economic slowdown would also eventually make a mark on its exports, he added.